LONDON: Chicago soybean futures rose to a 6-month high on Monday as diminishing crop prospects in South America and the potential loss of acreage in the US to corn helped fuel investor appetite for the commodity.
Corn prices also edged higher although gains were capped by favourable planting weather inUnited Stateswhile US wheat futures were little changed.
Traders expect the United States Department of Agriculture (USDA) to further cut estimates of soybean output fromBrazilandArgentinabecause of a severe drought.
Brazil and Argentina together make up almost half of the world soybean output. The USDA report is due to be released on March 30.
"The USDA is likely to lower its forecast for soy production in South Americaand that is the biggest support to prices in Chicago," said Luke Mathews, commodities strategist at Commonwealth Bank of Australia.
May soybeans on the Chicago Board of Trade rose 12-1/4 cents or 0.9 percent to $13.78 a bushel by 1020 GMT after peaking at $13.79-1/2, the highest level for the front month since mid-September 2011.
Lower South American soy production this year due to severe drought is likely to push up CBOT soybean futures to more than $14 per bushel soon, top oilseed analyst Thomas Mielke said on Monday.
"We have seen a small correction last week and I think the technical correction is over," Mielke, head of Hamburg-based research house Oil World, told a conference inBeijing.
"I expect prices of soybeans to reach $14 (a bushel) quite soon and probably rally towards $14-$15 or above sometime in the next 4 to 8 weeks, depending on South American harvest progress and harvest result."
Large speculators raised their net long position on Chicago Board of Trade soybean futures and options for a seventh straight week to the largest on record, regulatory data showed on Friday.
"We remain constructive soybeans as seasonal weakness in South American exports, coupled with growing production risks, should support near-term demand for US soybeans and soy meal," Morgan Stanley said in a report on Monday.
"Without additional South American soybean acreage, trend global demand growth of 4 percent would pull western hemisphere soybean stocks to their lowest in four years. We believe this necessitates greater soybean production, and prices will need to rally to achieve this acreage," the report added.
EARLY CORN PLANTING
Corn edged higher although favourable weather conditions in theUnited Statesraised output prospects in the world's top producer and exporter.
CBOT May corn was up 1-1/2 cents or 0.2 percent to $6.48 a bushel.
"The market is expecting a very good corn yield as we know that US farmers have opted for early planting," Mathews said.
The warmest March since records began in 1971 is encouraging farmers to plant corn early, as this usually leads to higher yields. The USDA will also release its plantings report on Friday.
The market, however, remained underpinned by tight supplies. Morgan Stanley said it expects theUS2011/12 stocks-to-use ratio falling to "precariously low levels."
"We still believe that prices need to move higher to justify the demand rationing currently implied by the USDA's balance sheet," the investment bank said in a report.
US wheat prices were little changed with CBOT May up 1/4 cent or 0.04 percent at $6.54-1/2 a bushel while European prices were higher with May wheat inParisrising 2.00 euros or 0.9 percent to 216.00 euros a tonne.
"Weather is getting to the forefront of the (European) market with drought growing throughWestern Europe," analysts Agritel said in a market note on Monday.
Agritel also noted firm export demand for EU wheat.
The European Union granted export licences for 440,000 tonnes of soft wheat last week, the highest volume since mid-November.
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